Russian oligarchs prefer to invest abroad

Another Russian oligarch distinguished himself by investing in a foreign attractive asset. Should we be proud of this - they say, know ours? Especially against the backdrop of lamentations by Russian authorities and business that the economy in Russia itself suffers from under-investment ...

The share of investment in Russia's GDP is below 20%. For development, you need at least 25-26% (for comparison: in China, this figure is about 40%). While this task seems difficult: there is no business access to cheap loans, the investment climate leaves much to be desired, despite the country's progress in all sorts of ratings such as Doing Business. All hope for the state and its budget as the main source of investment. And here comes the news: the investment fund of the co-owner of Alfa Group Mikhail Fridman LetterOne Retail (part of LetterOne holding) buys the British food network Holland & Barrett for $ 2.3 billion. This is one of the largest retail chains in Europe: 1,150 outlets in the UK plus stores in China, India, the Netherlands and the UAE. She specializes in healthy foods.

The acquisition will become another pearl in the crown of the Russian oligarch, which already costs about $ 14.4 billion, owning assets in the banking and oil fields, retail and telecommunications. Its main oil asset until 2013 was a stake in TNK-BP, which was sold at the peak of prices just for $ 14 billion of state-owned Rosneft, the entire deal was estimated at $ 28 billion. A successful sale was marked by a pilgrimage to the company of other Jewish billionaires to Israel with a camel caravan. And although Friedman then said that he "does not understand the oil market", last year LetterOne again acquired a fuel asset - the German oil and gas company RWEDea for $ 5 billion. Also one of the last acquisitions of the Friedman investment fund is the share in the US company of Uber services (it cost $ 200 million).

By the way, after the sale of TNK-BP by Rosneft, the Russian president expressed his hope that Alfa Group and its partners would invest the funds received from the deal in Russia. To which Friedman, whose capitals are really present in Russia, in an interview with the Financial Times noted that he is "committed to the Russian market," but he said: "The Russian economy is not in the best shape (the interview was given after the entry into force of Western Sanctions and the fall in oil prices. "- Ed.), Besides, it would be wrong to put all the eggs in one basket." That's about the eggs and the basket - this is the point.

Are they ours?

The main motive for the behavior of Russian oligarchs is precisely this. They believe, and not without reason, that investment in Russia is risky, and the rights of property owners are not sufficiently protected. Fridman never criticizes the Russian authorities. In the same Financial Times interview, he expressed caution, answering the question why he does not expand investment in Russia: "We need to reform the Russian economy, making it more open for investment, for competition, we need to privatize, reduce the state's share in the economy." At the same time, the sale of TNK-BP contributed to an even greater increase in the state share in the oil and gas sector. It's interesting what the same Friedman and his partners in TNK-BP are thinking about now, from which they got rid of the profits in time, watching the battle over another oil asset - Bashneft - between AFK Sistema and that Is it Rosneft?

By the way, you can call Friedman a Russian oligarch with a certain degree of conventionality: it seems that in Russia he spends 40% of his time (data for the previous year), that is, less than 183 days a year, which allows him not to be a tax resident of the country. Becoming, apparently, by that one, but by no means the only personification, in fact, the failure of the campaign "deofshorization" of Russian business, announced by the Russian authorities in 2015. As a result, only 20% of Russian businessmen returned money to Russia, 40% of beneficiaries of controlled foreign companies gave up the status of Russian tax resident, 9% transferred assets to non-resident relatives, 24% transferred assets to trust in favor of spouse or children, and 7% Nothing at all did not become (the data of the law firm "Egorov, Puginsky, Afanasiev and partners"). And today, according to various estimates, almost three hundred backbone Russian enterprises are registered in offshore areas. Yes that the infrastructure! Scandalously closed personally by Putin, a dump in Balashikha was managed by a firm from the Seychelles.

But Roman Abramovich, on the contrary, feels more confident than Friedman. So much so that (as of last year) to remain a tax resident of Russia. Although his main investment asset, the company Millhouse Capital UK Ltd, is registered in the UK. In general, Abramovich's largest assets are legally outside Russia. Continuing to work in it. For example, 31.03% of the metallurgical company Evraz, owned by him through the Cyprus offshore Lanebrook jointly with Alexander Frolov and Alexander Abramov. But Abramovich withdrew his share in Channel One from offshore, as prescribed by a new law that prohibits foreigners from owning more than 20% of Russian media.

Uralvagonzavod has grown fond of Latvia

Foreign investment structures have all Russian oligarchs and just big businessmen. These are, as a rule, not very transparent direct investment funds and holding investment companies. The most famous were the conglomerate of Renova Viktor Vekselberg and Basic Element of Oleg Deripaska, who, although he lost total control over the aluminum giant Rusal, owns large stakes in many foreign projects. S-Group works on the same principle
Alexei Mordashov, owner of Severstal. Against the backdrop of constant lamentations about the insufficient level of investment in the Russian economy, even before the crisis began around Ukraine and Western sanctions, Russia has confidently entered the top 20 of the leading countries in terms of the amount of exported direct investment.

By the end of 2013, nearly $ 480 billion was withdrawn from the country for investment purposes (15th place in the world). Then the volumes fell, but still last year amounted to an impressive $ 371 billion. At the same time, the classical Russian transnational corporations, owned mainly by the leading oligarchs, account for only 135-150 billion dollars of accumulated foreign direct investment. In addition, state companies and state corporations, including Gazprom and Sberbank, are invested in foreign assets.

Of course, 150, and especially 370 billion would not be superfluous in Russia itself. Although there is nothing wrong with foreign investment. This is done by all countries seeking to integrate into the world economy. So it is more convenient from the point of view of business processes, and not just optimization of taxes. However, the domestic large business demonstrates a too obvious preference for more reliable and guaranteed foreign investment, rather than work in the Russian business climate. Here is one small, but typical example. We often hear about our neighbor Latvia - say, this is a country that is very unfriendly to Russia and the Russians in particular. However, with such difficult political relations, Russian business continues to invest in the economy of Latvia, in fact, saving it during these difficult years of economic difficulties. At the end of 2016, Sweden withdrew its capital from Sweden (more than 500 million euros), the Netherlands (60 million euros), Britain (44 million).

And who saved the economy of "hostile Latvia"? The main direct investor was, in particular, Cyprus (250 million euros), but most of this money is of Russian origin. Directly from Russia came 100 million in 2015 and another 142 million euros in 2016. Oh, yes, even Luxembourg helped - invested 188 million euros. That's just under the Luxembourg flag in the economy of Latvia, apparently, still invested in the notorious Uralvagonzavod.

BTW

A couple of years ago, the owner of Rostselmash, Konstantin Babkin, in a note to Vladimir Putin explained why he prefers to produce combines not only in Russia, but also in Canada, where this production increased by 170% (to $ 361 million) from 2008 to 2013, And in Russia for the same period only by 5% (up to 539 million dollars). From the Russian advantages, the businessman noted small salaries and a lower price for gas. But "for Canada" he listed already eight reasons: lower energy tariffs and transportation costs, the cost of a loan in Canada is several times lower. An order of magnitude lower there is the cost of administrative procedures: the plant in Canada requires four security officers, in Russia - 150 people. According to Babkin, additional costs for bureaucracy, accounting and tax reporting, as well as additional costs for local authorities in Russia, require about $ 1 million more. The taxes in Canada are also lower. So, you can call the oligarchs "to be patriots", of course, but you can not attract investment.